Smorgasbord. Weekly Report week ending 1 Sept., 2017. Executive Takeaway. Our market remains range bound. Wait until direction becomes clear.
If you must take a position in stocks, the strongest sectors are Materials and Energy. Look to those sectors for opportunities.
CONTENTS
XJO Charts, Daily, Weekly, Monthly.
Internals – Australian Market.
Best Sectors.
Rockets and Fizzers
Summing Up.
XJO Charts, Daily, Weekly, Monthly
XJO Daily:
XJO remains in a sideways trend. This week, XJO broke below the 200-Day EMA but then bounced strongly off horizontal support. Expect a move back up to the top of the range.
XJO Weekly:
XJO finished down a little, -0.34%. The long-term trend is up, but the Index is at the lower edge of the bullish Standard Error Channel. Usually, but not always, the next movement is upwards to the top of the Standard Error Channel. A decisive break lower would suggest we’re in a bear market. Wait.
XJO Monthly:
We have had only one day in the month of September, so this graph tells us little.
The Two-Month Moving Average has fallen below the 10-Month Moving Average. We need to see a strong month in September otherwise this will be a sell signal.
Indicators have given first-level sell signals by closing below their 5-Day Moving Averages.
The three charts (Daily, Weekly and Monthly) are all indecisive. Wait.
INTERNALS – AUSTRALIAN MARKET.
The following is a graph of the Relative Strength of the various Sectors of our market over the past 52 Days:
The strongest sectors are XMJ (Materials) and Energy (XEJ). XGD is an industry group, a sub-set of XMJ. (I include that as a lot of traders like to play in that arena, and is often a good safe haven if we get a bear market.)
Improvements this week saw Utilities and Property mover out of the Negative Zone into the Positive Zone. Both are defensive sectors. Utilities saw the biggest improvement of those two.
Look for opportunities in the strongest sectors. Avoid the sectors below the zero line. There are always individual exceptions to those rules.
The number of stocks positive on the Directional Movement Histogram fell a little from 60% to 54%. It remains in bullish territory. This is a shorter term trend indicator and can move more rapidly, week to week, than the long-term indicator (stocks above the 200-Day MA). Stocks above 200-DMA also fell. Last week it was at 67%, it fell to 57% this week.
The Cumulative Volume Indicator continues to climb despite this week’s falls in the XJO.
This is a running total of volume going into advancing stocks minus volume going into declining stocks. This is another measure of breadth using volume and issues traded. This is strongly positive so there’s plenty of optimism bubbling below the surface. That optimism shows up in the Small Ordinaries Index (XSO) which this week broke above a long term resistance level.
SECTOR CHARTS (Daily)
XMJ (Materials)
XMJ was the third best performer in our market this week, +1.38%
XMJ could be close to topping out. It broke this week above an oblique restraining trend line. That indicates it is very strong. RSI9 is at 75 – overbought. CCI is showing a potential negative divergence. Wait for a pullback.
NCM and NST, both gold mining companies, are the strongest stocks on a Relative Strength basis. Both have a Momentum Rating >1. That’s very strong. AWC, FMG and BHP are >0.9. Look to those stocks for favourable entry points using technical analysis.
XEJ (Energy):
XEJ was flat this week, -0.01%.
XEJ has had a spectacular rise since mid-August breaking strongly above the 200-Day EMA. That rise came to a halt on Thursday. We’re now waiting for a good entry point into the Energy Sector.
CCI is showing a negative divergence – wait for some bullish buy signals.
Santos is currently the best stock with a MOM Rating >1. It was up 2.73% for the week after providing a good report at the end of the previous week. Santos is now back above its 200-Day MA – so it comes into calculations.
Avoid Woodside.
XUJ (Utilities)
XUJ has been up six of the past seven days. It’s run hard and hit horizontal resistance. A break above that would set up further upside.
XUJ topped out at the beginning of June. So it’s had almost three months in a down trend. This week’s rise makes it overbought in the short term.
The strongest stock is SKI, but it’s not especially strong. SKI pays an unfranked dividend of 5.4%, so it’s one for investors seeking income. Wait for a pull-back.
Consumer Discretionary (XDJ)
XDJ down this week -2.03%.
It looks like the shorters (Gerry Harvey’s nemesis) are back into HVN (-10.73% this week) and JB Hi-Fi (down -7.2% this week).
Flight Centre (FLT) is the only stock worth considering. MOM Rating >0.9. It is up nearly 70% since late March. It fell this week -1.51%. Use technical analysis for a re-entry.
Telecomms. (XTJ)
XTJ was the worst performing sector this week -6.13%. It is down nearly -40% since July, 2016. This last time it was this low was back in 2012.
The positive divergence on the CCI suggests we’ll see a counter-trend rally. Leave this one to the bottom-feeders.
Health (XHJ)
XHJ had a reasonable week, up +0.41%, but not enough to convince that this is a buy. It needs to break above the first level of horizontal resistance.
Consumer Staples (XSJ)
XSJ had a reasonable week +0.61%. It is now faced with a minor overhead resistance level. A break above that would be positive. A test of the recent highs set in May seems probable.
The strongest stock is Treasure Wines, MOM Rating >1.
Wesfarmers continues to outpoint Woolworths if you must have one of the two big retailers. Wesfarmers has a dividend, fully franked, of 5.2%. This is an income play.
Industrials (XNJ)
XNJ down a little this week, -0.27% but remains in a short-term trading range. A break above minor horizontal resistance would be bullish.
XNJ has a few solidly performing stocks but nothing spectacular, e.g., ALQ, DOW, SYD. DOW and SYD both pay reasonable dividends.
Financials X-Property (XXJ)
This is the albatross around the neck of the XJO. XXJ is the largest sector in the XJO and is performing poorly due mainly to the big banks and big insurers. XXJ down this week -1.37%.
Reports from the big banks were actually quite positive, but these companies (especially CBA) keep being hit with black swan events. So the XXJ goes down.
It is indicative that the best two momentum stocks are: IFL (a fund manager) and MPL (medical insurer). Next best are two regional banks: Bendigo and Bank of Queensland.
MPL has had a rocket under it after a good report. Up >14% in seven days. It is now at a 52-Week High. That usually results in further upside.
Dividends: MPL 3.9%, IFL 4.7%, BEN 5.6%, BOQ 6%. All are fully franked.
Property (XPJ)
XPJ had a good week, +1.07%, but needs to do a lot more work to prove its worth. It remains well below the 200-Day EMA and the 50-Day EMA.
Shopping Centre stocks remain weak (Westfield, Scentre Group and Charter-Hall).
The strongest stock is MGR – although not especially strong. It pays an unfranked dividend of 4.5%.
Gold Mining (XGD)
XGD is a sub-set of the Materials Index – and is stronger than any of the S&P Indices.
It was up this week +4.61% and seems destined to get to the next level of resistance.
XGD has run hard but there is no sign yet of failing.
NCM and NST are both successful gold mining companies and are preferred over EVN amongst the ASX100 stocks.
Summing Up:
Our market remains range-bound. It seems destined, once again, to reach the top of the range.
Optimism is, however, bubbling under the surface. Small Ordinaries have broken out to the upside. Cumulative Volume Index continues to head higher.
Consumer Discretionary stocks (particularly HVN and JBH) are once again under pressure.
The best sectors to look at are Materials and Energy. Look to those sectors for buying opportunities. Big Banks and Telcos remain the drag on the broad market.
(20min delay)